Capital gains taxes are also set to rise, from 15% to 20%. That's
a bigger percentage increase, but the resulting capital-gains
rate will still be historically low.

Screams about how these top-bracket income tax and capital-gains
tax increases will ruin the economy by hammering spending and
eliminating the incentive to work can be seen for what they are:
The whining of people who don't want their taxes to go up.

The change in one tax rate on January 1, however, will be
startlingly large: The change in dividend taxes.

In short, unless Congress compromises, the top bracket for
federal dividend taxes will nearly triple on January 1, from 15%
to 43.4%.

(Lower dividend tax brackets will rise, too--back to ordinary
income tax rates--but these brackets seem likely to be given a
tax cut. And dividend taxes may be included in that cut).

The ordinary income tax bracket will still be
historically low, so don't fall for any whining that suggests
otherwise.National
Taxpayers Union

What this means is that well-off Americans who are collecting,
say, $100,000 a year in gross dividend income will keep about
$57,000 next year versus $85,000 this year, a drop of 33%.

Unlike the change in income taxes and capital-gains taxes,
that change is big enough to create a strong incentive
for changes in behavior.

For the highest earning Americans, receiving taxable dividend
income will become strikingly less attractive than it is now. As
a result, they will likely try to shelter this income in
non-taxable accounts or shift dividend-paying investments
to investments designed to produce long-term capital gains (which
will still be taxed at a far lower rate than ordinary income).

Companies, meanwhile, may come under pressure from shareholders
to stop raising dividends and, instead, use excess cash to buy
back their own stocks.

None of this is necessarily "bad." It's also certainly reasonable
to tax dividends at ordinary income rates, unless you're trying
to encourage people to invest in dividend paying investments.
And, unlike some of the other tax increases that are scheduled to
hit on January 1, a top-bracket dividend tax increase will land
squarely on the highest earning Americans, folks who arguably
have more flexibility with which to be able to afford it.

But a jump from 15% to 43.4% is a big tax increase. And, as yet,
Congress hasn't paid much lip-service to changing that.